Are there any exceptions to the restriction on a Carls franchisee operating a competing restaurant after the agreement expires?

According to Carls's 2024 Franchise Disclosure Document, there are specific exceptions to the restrictions on a franchisee operating a competing restaurant after the franchise agreement expires. The standard restriction prevents a franchisee from engaging in any restaurant business that could be considered competitive within a 2-mile radius of the former Carls location or any existing Carls restaurant. A competitive restaurant is defined as one where designated entree items (like hamburger, chicken, or breakfast sandwiches) account for 20% or more of sales during any daypart or that features/promotes these items in advertising, and operates in a quick-service format. This restriction lasts for two years following the expiration, transfer, or termination of the agreement.

However, this restriction does not apply to the franchisee's existing restaurant or foodservice operations that are identified in Appendix A of the franchise agreement. This means that if a franchisee already owns and operates a restaurant business before entering into the Carls franchise agreement, and this business is disclosed in Appendix A, the post-term restriction will not prevent them from continuing to operate that existing business.

Additionally, the restriction does not apply to other restaurants operated by the franchisee that are also franchised by Carls or its affiliates. In other words, a franchisee can continue to operate other Carls franchises or franchises from Carls's affiliated brands without violating the post-term competitive restrictions. These exceptions provide some flexibility for franchisees who may have pre-existing restaurant interests or who expand their business through additional Carls franchises.